With an economy that’s become increasingly credit-dependent, credit is a “fact of life” for a majority of North American consumers. Still, too many individuals are surprisingly “credit-illiterate”.
CNBC claims that 68% of Americans destroy their credit by the age of 30. Whether or not the data is the same for Canadians, the importance of educating our youth on financial management and credit is huge. But even for those of us who may not have been taught, the information is available to us and we have a responsibility to educate ourselves.
Why is Credit Rating Important?
Your credit score influences any major purchase you might make that requires any type of financing. Any time you want to purchase a vehicle or a home or even a piece of furniture (or a TV or computer) on a monthly payment plan, your credit report will be checked first.
Your credit score will determine the rate at which you will borrow money or if, in fact, you can.
The better your credit score, the lower your borrowing costs.
Paying Cash? Credit is STILL Important!
MYTH: Credit rating isn’t important if you don’t buy things on credit.
TRUTH: It’s rare, but some people live primarily on a “cash only” basis, making purchases only when they can pay for the item in full (even on bigger items like vehicles and houses). However, take into consideration things like utilities or rent. Any time you need to obtain a new service (such as electricity or natural gas, internet or phone service), the utility company will check your credit rating before opening a new account for you. Even landlords will request a credit check before approving you as a tenant.
Credit Impacts Relationships
Beyond the financial aspects, your credit score can even impact your relationships.
- Recent surveys indicate that individuals consider credit score of utmost importance in determining romantic partners.
- Financial problems are frequently listed as a key factor in divorces.
- A recent poll from BMO actually listed finances as the number one reason for divorce.
There’s no denying the impact that our finances have on our family relationships.
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